RELIANCE, INC. Q3 FY2024 earnings call

• Businesses executed well through challenging market conditions, outperforming industry shipments and maintaining gross profit margin within sustainable range. - Generated $463.9 million in cash flow from operations. - Invested $112.8 million in capital expenditures, majority for growth activities. - Completed 4 acquisitions in 2024, M&A pipeline active. - Repurchased $432 million of common stock, reduced shares outstanding by nearly 3%. - Paid $60.6 million in dividends. - Appointed Jim Kamsickas as Independent Director, Mark Kaminski to step down as Nonexecutive Chair, Doug Stotlar to succeed him. - Acknowledged impact of severe weather events, all personnel safe. - Celebrated 85 years in business and 30th anniversary as publicly traded company.

In the third quarter, tons sold increased 7.1% or 3.7% on a same-store basis compared to the third quarter of 2023. Nonresidential construction products, which represented about one-third of sales, had significant year-over-year growth. General Manufacturing, also about one-third of total sales, had diversified shipments. Aerospace products, comprising approximately 10% of total sales, had healthy commercial aerospace demand and stable defense-related demand. Tolling business, representing 4% of total sales, saw improved demand in Q3 2024. Semiconductor industry demand was subdued but showed signs of stabilization.

• Fourth quarter tons sold expected to be down 6% - 8% compared to third quarter, up 4% - 6% compared to fourth quarter of 2023. - Average selling price per ton sold for fourth quarter expected to be down 1.5% - 3.5% compared to third quarter. - Anticipate FIFO gross profit margins to stabilize in fourth quarter. - Non-GAAP earnings per diluted share for fourth quarter of 2024 expected in range of $2.65 to $2.85.

• Heightened near-term uncertainty in fourth quarter contributing to headwinds in demand and pricing. - Semiconductor industry still has continued excess inventories in supply chain (though showing signs of stabilization).

Q: Can you talk a bit about what gives you confidence that some of the impact in 4Q is temporary and what will drive better demand into next year?

A: Karla Lewis said they're confident long-term as most products require steel, and with diversified breadth of products, they expect a position regardless of policy. Presidential election uncertainty is a factor, but lower interest rates and unspent government stimulus dollars set them up well for 2025.

Q: Are you hearing any slowdown in the auto market through the tolling business?

A: Karla Lewis said for the most part, they haven't seen a pullback, expect normal seasonality, and lower interest rates could help consumer activity in automotive market.

Q: Why the LIFO reserve wasn't changed to reflect pricing?

A: Arthur Ajemyan said there's mix impact with specialty aerospace products having long lead times, shifting LIFO income from 2024 to 2025.

Q: Does the fourth quarter mean the trough in gross margins?

A: Arthur Ajemyan said it depends on pricing in first quarter; if there's tailwinds in 2025, Q4 could be the trough, but they're staying consistent with guidance for fourth quarter.

Q: Context behind semiconductor industry stabilization?

A: Karla Lewis said on consumables side, some activity as customers work through inventory glut; on infrastructure side, timing impacted by factors like permitting slowdowns, but still bullish long-term